LEBANON

Photo by: fashcool

Republic of Lebanon

Al-Jumhuriyah al-Lubnaniyah

COUNTRY OVERVIEW

LOCATION AND SIZE.

Situated in the Middle East, Lebanon is a small country on the eastern
shore of the Mediterranean Sea. Lebanon has a narrow coastal plain along
the Mediterranean Sea, which is 225 kilometers (139.8 miles) long and is
bordered by Syria on the north and east and by Israel on the south. A
small country, Lebanon's total area is only 10,400 square
kilometers (4,014 square miles), roughly two-thirds the size of the
state of Connecticut in the United States. Beirut, the capital, is
located in the center and overlooks the Mediterranean Sea. Other major
cities include Tripoli in the north and Sidon in the south.

POPULATION.

The population of Lebanon is estimated at 3,578,037, according to July
2000 estimates, an increase of 578,037 from 1980. In 2000,
Lebanon's birth rate stood at 20.26 per 1,000, while the death
rate was reported at 6.42 per 1,000. With a projected growth rate of 1.2
percent between 2000 and 2015, the population is expected to reach 6
million by the year 2029.

Lebanon's population is highly divided along both religious and
confessional lines (the presence of groups of different faiths within
the same religion). Muslims in 2001 were believed to have accounted for
60 percent of the population. Christians form the second largest group
in the country. Lebanon is also home to some 200,000 Palestinian
refugees, mostly Sunni Muslims, many of whom have lived in refugee camps
since arriving in the country in 1948. For political reasons, no
official census has been conducted since 1932. Muslim and Christian
factions in Lebanon were engaged in a devastating civil war that began
in 1975 and ended in 1990, when stability was restored to the country.

As in many developing countries, a majority of Lebanese (around 90
percent) live in urban areas. The population is unevenly distributed,
with the vast majority of the population concentrated in the coastal
cities of Beirut, Sidon, and Tyre, while other parts of the country,
namely the Bekáa Valley, remain sparsely populated. The uneven
population distribution has given rise to regional disparities. The
coastal cities continue to receive much government attention, while the
rest of the country has remained largely neglected. The population of
urban areas has grown significantly since the 1960s, mostly because the
cities have received more government funding and attention. In 2000, the
capital Beirut and its suburbs was home to 1.3 million people. The
northern city of Tripoli is the second largest in the country, with an
estimated population of 450,000.

Lebanon's population is generally young, with 50.7 percent below
the age 24, and is one of the most highly educated in the region. The
adult literacy rate in Lebanon is estimated at 90 percent. Primary
education in Lebanon is mandatory, and private education is prevalent.
Lebanon's university system is also highly developed. The
health-care system is one of the most

developed in the region. As a result, Lebanon also has one of the
highest average life expectancies in the region, at 68.5 years. Infant
mortality in Lebanon is also low by regional standards.

INDUSTRY

MANUFACTURING.

The manufacturing sector is an important contributor to the economy,
accounting for 17 percent of the GDP in 1998 and employing 15 percent of
the labor force. In 1999, the sector accounted for 40 percent of
exports. Total employment in the manufacturing sector in 1998 stood at
180,000 people.

Historically, and unlike neighboring Arab countries, Lebanon has never
gone through a state-led industrial growth phase, and the governments
have generally adopted an open policy that has encouraged free
competition in the sector without government interference.
Lebanon's industrial base is by all means modest, mostly
comprised of family-based small firms. Most finished and semi-finished
goods are imported. Much of Lebanon's local manufacturing
consists of producing goods for local consumption—mainly food,
furniture, and clothing manufacturing. The most important industrial
activity is focused on food, beverages, and chemical products, which
receive the highest level of investment. Manufacturing activity is
concentrated in the population centers of Beirut and Mount Lebanon,
where an estimated 60 percent of the firms are located. Some 19 percent
of manufacturing firms are located in the north.

Since the end of the civil war in 1991, the manufacturing sector has had
to struggle to regain its pre-war competitiveness and invest heavily in
new equipment. During the war, several factories were forced to close as
a result of the armed hostilities, declining consumer spending, and lack
of funding. Major barriers facing the sector in 2001 are rising customs
duties and political instability, 2 difficulties which have prevented
many multinational companies from establishing subsidiaries in Lebanon.
The U.S. State Department stated that "the sector's
outlook remains bleak, as high operating costs, low productivity,
obsolete equipment and limited access to medium and long term credit
impede the performance of the sector."

MINING.

With no commercially exploitable mineral deposits, Lebanon has no
significant mining base. Quarrying for marble, sand, and limestone for
cement production, however, has accelerated in recent years. The output
is mostly consumed locally for construction, and only a tiny fraction is
now being exported.

SERVICES

TOURISM.

Tourism was once a very important contributor to Lebanon's
economy, accounting for almost 20 percent of the GDP in the 2 decades
before the start of the civil war. Since the end of the war, the sector
has managed to revive somewhat, but tourism has yet to return to its
pre-war levels. Tourism in 1999 accounted for 9 percent of the GDP. In
2001, the tourism sector was one of the fastest growing sectors of the
economy, with the number of tourists visiting Lebanon between 1996 and
2000 growing at the rate of 14 percent annually. Lebanon's rich
archeological and cultural heritage, coupled with a mild climate and
diverse terrain, has been a major attraction to tourists.

Successive governments have invested heavily in the sector, and there
has been substantial investment in building luxury hotels and upscale
restaurants, in response to the return of tourists (mainly Gulf Arabs)
to Lebanon, especially in summer. It is estimated that there are 12,000
hotel beds, with 90 percent located in Beirut and Mount Lebanon. Some
860 additional hotel rooms will be built in 2001 and another 1,200 will
be added in 2002. Despite continued political instability, growth in the
tourism sector is expected to pick up in the coming years, especially
after the Israeli withdrawal from south Lebanon in May 2000.

FINANCIAL SERVICES.

The most important sector of Lebanon's service industry is the
financial services industry. The sector lost most of its importance
during the civil war with the flight of the majority of foreign firms,
but there has been a concerted effort to renew the sector since 1991. As
a result, the sector grew rapidly in the 1990s, mostly the result of
investment in government debt and reconstruction and reported
double-digit growth throughout the 1990s.

Financial services continue to undergo expansion and consolidation,
especially of small family-owned banks. Several international banks now
have offices in Beirut. In an effort to present Lebanon as an
international financial center, the government announced in 1995 a
series of financial laws aimed at preventing
money laundering
. In particular, one of the passed laws gives international
investigators access to the accounts of Lebanese banks.

Banking, by far the most profitable sector, employs some 15,000 people.
Before the civil war, Lebanon was the banking center of the Middle East,
owing to its liberal banking regime, one of the most liberal in the Arab
world. Several Arab and foreign banks pulled out of Lebanon during the
war, but by 2001 several of these banks had returned. However, most of
them have only small branches in Beirut, and the pre-war interest in
Lebanon's banking sector is yet to return.

There are some 67 active commercial banks in the country, in addition to
small family-owned enterprises. Most of these banks are up to
international standards, largely due to concerted government efforts to
tighten regulations and increase
capital adequacy
requirements.

The Beirut Stock Exchange, closed in 1975 with the outbreak of the civil
war, re-opened in 1995. Trading, which began in January 1996, has been
thin, and the number of listed companies has been relatively small.
There is a total of 12 listed companies, including 4 financial
institutions, 1 car retailer, and a supermarket chain. Weekly trading in
2000 rarely exceeded US$2 million.

CONSTRUCTION.

The construction sector grew at a very fast pace between 1991 and 1996,
contributing to an average of 6.5 percent growth in the GDP. The
sector's growth was in response to the influx of huge sums of
private investments, mostly from Lebanese expatriates and Gulf Arabs who
were devoted to the reconstruction of residential and commercial
buildings destroyed during the war. These investments were coupled with
large-scale government projects to rebuild the country's
infrastructure, including the US$400 million project to rebuild Beirut
International Airport and the complete renovation of downtown Beirut by
the quasi-government company, Solidere.

Since 1996, the sector's contribution to GDP has dropped, as
private investments and government spending began to dwindle. The
slowdown was partly brought about by the oversupply in some areas of the
construction market, especially in housing. International and domestic
confidence in Lebanon's stability also dropped significantly in
the aftermath of Israel's military operations in Lebanon in the
summer of 1996.

RETAIL.

Lacking many large commercial centers other than Beirut and its suburbs,
Lebanon has a poorly-developed
retail
sector. While Beirut is home to a variety of retail stores, including
fast food franchises such as McDonald's, Burger King, and
Starbuck's, the majority of towns in the interior of the country
have small family-owned shops, farmers' markets, and temporary
roadside stands.

ADVERTISING.

Lebanon has a booming advertising industry that ranks second in the
region in terms of size and profitability after Dubai. Some 150 national
and international advertising agencies are based in Lebanon, employing
some 8,000 people. In the absence of reliable statistics, the
sector's revenue is believed to be in the range of US$150 million
annually. The largely unregulated sector is dominated by the
country's 4 television stations and the print media, which
account for 55 percent and 34 percent of the sector's revenue,
respectively.